Enhanced Protection with no protected lump sum?

SA96

Hi everyone,

Does anyone have any experience with EP clients who have no protected lump sum entitlement.

I have a specific scenario.

1. Client has EP with no protected PCLS.
2. Client crystallised £1.75 million in 09/10, and used up 100% of the LTA. The LTA in 09/10 was £1.75 million and the client received £437,500 in tax-free cash.
3. Client now has c£300,000 in SIPP funds uncrystallised.

My assumption was that the client's remaining LSA is £0, as he used up 100% of his LTA in 09/10.

I also calculated that he wouldn't benefit from a transitional certificate as he has received more than £375,000 in tax-free cash.

But I've been told by a SIPP provider that the client has a remaining LSA of £106,275.

Their calculation is based on 100% of the standard LSA being used (£268,275), and because the client has EP of £375,000, his remaining LSA is £106,275.

Are they correct? It's the first time I've come across a client with EP and no protected PCLS.

les_cameron

I agree with your analysis. Ask them to quote the legislation that shows they are correct.

SA96

@les_cameron said:
I agree with your analysis. Ask them to quote the legislation that shows they are correct.

Thanks Les, I will definitely do that.

les_cameron

They key point is they are treated as having a standard LTA of £1.5m at 5 April 2024 and they have used it all. So used £375k.

SA96

@les_cameron said:
They key point is they are treated as having a standard LTA of £1.5m at 5 April 2024 and they have used it all. So used £375k.

Thank you, I will let you know what the SIPP provider says.

PoppySheppard

Hi, sorry to jump in on this but what was the outcome? I've had the same thing where we calculated a TTFAC would be better for a client with enhanced protection no protected TFC but the provider have said the standard is better based on the following calc:

But I thought the calc is based on £1.5m and can't see why the standard LSDBA is being used? I've looked through guidance and can't see this mentioned anywhere either.

Thanks

Admin

@SA96 Giving this a bump because @PoppySheppard was interested in the outcome.

SA96

Our client received the c£100k of TFC that I didn't think they were entitled to!

The SIPP provider (Curtis Banks) were adamantant that LTA usage for EP clients with no protected lump sum is based off £1,073,100.

We pushed back a few times, but they were insistent that they had checked with their product team, and that they had calculated it correctly.

les_cameron

You run the sums off the standard LTA when there is no protected amount on the certificate.

PoppySheppard

Thanks both! Every day really is a school day!